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India bucks the trend

Feb 7, 2009

After last week's stellar performance, the Indian benchmark index, the BSE-Sensex saw a 1.3% decline during the week. But the rest of major markets in the Asian region were better off as their stocks rose for a second week on account of optimism that government measures worldwide will ease the financial crisis. Japan's Nikkei gained 1% during the week, while Hong Kong's Hang Seng saw a rise of 2.8%. China's Shanghai Composite index led the Asian pack with a 9.6% surge.

Other major markets round the globe also posted decent gains. As for the European region, Germany and France saw gains of 7.1% and 5% respectively. The US markets too performed fairly well with a 3.5% gain for the week on higher expectations from the economic stimulus package.

Indian commerce ministry data released during the week showed that the trade deficit figure, having shot up by 31.5%, stood at nearly US$ 7.5 bn for the month of December 2008. This was due to a 1% drop in exports as compared to a growth of 9% in imports. Exports from India stood at US$ 12.7 bn as compared to US$ 12.8 bn in December 2007. Imports on the other hand stood at US$ 20.3 bn as compared to US$ 18.6 bn in the corresponding month in the previous year. This is the third consecutive month where the exports numbers have dipped on account of a slowing global demand.

Wholesale price index based inflation number for the week ending January 24 dropped to 5.07%, after rising for two consecutive weeks. The index fell 0.57% from the earlier 5.64% in the preceding week on the back of lower prices of fruit, vegetables and manufactured goods. The impact of trucker's strike on inflation finally showed signs of receding.

Software industry body Nasscom said that IT-BPO exports are expected to grow at around 16% to 17% (against the earlier 25% to 30% growth estimates) to clock US$ 47 bn in FY09. Nasscom has revised its growth projection on the back of a slowing global economy and lower demand in the BFSI sector. Furthermore, Nasscom has indicated that the Indian IT-BPO industry will see sustainable growth over the next two years and clock revenues of US$ 60 bn to US$ 62 bn by FY11. This figure, too, has been revised downwards. Earlier, the growth was pegged at US$ 60 bn by 2010.

Source: Yahoo FinanceSource: Yahoo Finance

Source: SEBISource: BSE

Source: BSESource: BSE

Movers and shakers during the week
Company 23-Jan-09 30-Jan-09 Change 52-wk High/Low Change from 52-wk High
Top gainers during the week (BSE-A Group)
Spice Communications48 72 51.6% 84 / 23 -13.8%
G.E.Shipping171 207 21.2% 518 / 139 -60.0%
Grasim1,197 1,413 18.0% 3,050 / 831 -53.7%
Indiabulls Fin. Serv. 111 130 16.7% 685 / 78 -81.1%
Sesa Goa 85 99 16.6% 217 / 60 -54.4%
Top losers during the week (BSE-A Group)
DLF Ltd. 177 138 -22.0% 899 / 124 -84.6%
Educomp Solutions 1,793 1,401 -21.8% 4,340 / 1331 -67.7%
Sintex Industries 137 109 -20.4% 491 / 107 -77.8%
Housing Dev. Infra 97 78 -18.9% 769 / 69 -89.8%
Baja Fin Serv 116 96 -17.7% 670 / 82 -85.7%
Source: Equitymaster

Meanwhile, the Bank of Japan decided to follow its US counterpart in terms of bailing out the banks in the economy. It will do so by purchasing 1 trillion yen (US$ 11 bn) worth of shares in other companies owned by the financial institutions to shore up the latter's capital. This will free the banks' balance sheets of unnecessary burden and help them focus on their core business of assessing credit risks rather than riding the fortunes of the stock market. The central bank has decided to purchase the shares until April 2010 and hold them until at least March 2012.

But indeed the most alarming global news came from the US yet again. New claims for unemployment benefits in the US have touched 0.63 m, the highest figure in last 26 years. The number of people collecting the benefits also jumped to 4.8 m, indicating tough times in the US economy. India too felt the heat in the unemployment figures. As per the Labour ministry, 0.5 m people in India were rendered jobless between October to December 2008. Eight major sectors like textile and garment industry, metals and metal products, information technology and BPO, automobiles, gems & jewellery, transportation, construction and mining industries were included in the survey. The total employment in these sectors has come down from 16.2 m in September 2008 to 15.7 m in December 2008.

Concerns about all the negative data led crude oil to decrease 4% during the week to close at about US$ 40 per barrel, while gold declined 2% to close at a level of about US$ 911 for an ounce of the yellow metal.

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